French Renovation Mortgages Summary

You can finance substantial professional renovation projects which require French planning approval using French renovation mortgages.

You do not need to appoint a professional project manager for work financed by French renovation mortgages. There is no requirement to place the contract with a single builder so you can choose to use a number of specialist subcontractors.

For all French renovation mortgages the lending bank will need contractual estimates covering the total cost of the works through to completion. Each estimate must also include the statutory 10 year French building works guarantee.

The lending banks will grant French renovation mortgages up to their declared LTV (Loan to Value) limit and will apply their standard DTI (Debt to Income) financial qualification criteria to the borrower.

The contractor is paid directly by the lender, upon confirmation that the work has been completed to the agreed standard. If appropriate, the lender will pay the contractor by stage payments.

Building Regulations

There are legal requirements for French buildings concerning safety of persons, sanitary requirements, hygiene, and energy consumption.

The code of practice is set out in Documents Techniques Unifiés DTU to which all public contracts must adhere. There are also Avis Techniques (technical advisory notes) for materials, components and equipment, where no standardisation yet exists.

For private contracts, it is the contractor’s responsibility to comply with “Règles de l’Art“. The Règles de l’Art include the norms, the DTUs and the “savoir-faire” (know how) of the contractor.

The contract should specify all the norms and DTU’s to be observed.

AFNOR (Agence Française de NORmalisation) is the French institution that sets out technical or technological recommendations applicable to products. When a product has the mark “NF” (Normes Françaises) it means that it has been inspected, that it conforms to the relevant norms and is suitable for use. Representatives of AFNOR can inspect works in progress, carry out tests and request to see all official documents. They can do so for two years after the completion of the construction. This does not happen very often on private construction.

Though there are exceptions, you will find that all French renovation mortgages will include a requirement that the works being financed will need to have compliance to French standards included within the contract.

French Property Insurance

The Loi Spinetta requires the owner, the builder and all contractors undertaking construction work to be insured.

The insurance requirement for contractors and builders are divided into 4 areas:

Responsibility for Perfect Achievement: This runs for a period of one year starting from the delivery of the works to the client.

Biennial Responsibility: This runs for two years starting from the delivery of the works to the client. This insurance applies to minor works and equipment defects.

Decennial Responsibility: This runs for ten years starting from the delivery of the works to the client. This covers structural defects as well as significant non-structural defects.

Third Party Responsibility: This runs for ten years starting from occurrence of the damage.

Additionally, the owner (Maître d’Ouvrage) must have third party insurance (dommage-ouvrage – DO) to cover construction, renovation, or alteration works on property. Consequently, you must have this insurance for the French government to officially sanction the work.

In all cases works funded by French renovation mortgages will need full insurance cover.

Project Management

The role of the Maitre d’Oeuvre (Project Manager) is to:

Advise the client.

Design the project.

Supervise and coordinate the project.

Assist in the choice of builders and artisans.

Analyse and negotiate the estimates.

Assist in the financial conclusion of the contracts.

If you live elsewhere, a locally based Project Manager can help to keep the work on schedule. Consequently, you can include the cost of project management in French renovation mortgages.

Registered Builders

Companies or individuals may carry out property renovation work in France.

The main types of professional you can hire are:

Entreprise général du bâtiment (general contractor), who will co-ordinate all the separate tradesmen.

Constructeur de maison individuelle (house builder), who will also have access to the individual skills required or individual artisans (craftsmen), each having their own particular skill such as tiling and roofing.

Individual tradesmen or artisans.

French artisans will, by law, have a Siret number for their professional registration and will be authorised and required to provide Décennal and Responsabilité Civile Insurance (third-party insurance).

Any renovation done by professionally registered builders or artisans is insured for 10 years.

Buyers can, and should, request the insurance details of the contractor prior to signing a contract with them.

You must use French registered builders to carry out all work funded by French renovation mortgages.

You also have a tax inducement to use a registered builder. Because, notably, building work on property over 2 years old completed by registered builders has a lower rate of rate TVA/VAT applied to it. Because rates change often, you should therefore check the French Government Website for the current rates.

Disadvantages of Unregistered Builders

You cannot use a French renovation mortgages to pay unregistered builders.

Certainly, there are many people, French and foreign, who are willing to work “on the black”, especially for cash. Because they pay no tax and social charges their work may be cheap.

If you use unregistered contractors, you will not receive a guarantee for the work. This is a significant disadvantage, especially if you will sell the property within 10 years.

More importantly, an unregistered contractor will have no insurance so you will be personally liable for all 3rd party claims. In France, if you hire non-registered labour of any sort you are totally and personally liable for all personal injury and third party claims including claims from the workman. This risk is explicitly excluded from all French household and property insurance.

An unregistered contractor cannot give you a legally valid receipt cannot for the work they have done. Because you will not have a legal receipt, you will not be able to offset the cost of works against French Capital Gains Tax.

An Example of What Might Happen

Let’s look at a simple example, a property owner paying a neighbour to fell a tree.

Suppose things go wrong and the neighbour, “working on the black,” miscalculates causing the tree to fall on someone. The falling tree causes severe long term injuries to a third party and their damage to their property. It also injures the neighbour who felled the tree.

A French court would hold you personally liable for the damages claim from the innocent third party, both for the injuries and the property damage.

They would also likely decide that the self-inflicted injuries suffered by the neighbour “working on the black” were also the liability of the householder.

Finally, the insurers would likely refuse to pay for any damage caused to the householder.

To make matters worse, the French authorities would prosecute the householder for illegally employing unregistered labour.